Professional Documents
Culture Documents
Coca-Cola India:
Coca-Cola was the leading soft drink brand in India until 1977 when it left rather than reveal its formula
to the government and reduce its equity stake as required under the Foreign Exchange Regulation Act.
With the acquisition of 5 major brands in 1993, Coca-Cola cemented its presence which gave an
ownership of the nation's top soft-drink brands and bottling network. Sanjiv Gupta joined Coke in 1997.
With a clear mission, vision & his marketing competency being critical to growth of company he was
instrumental to the company’s success in developing a brand relevant to the Indian consumer and vast
rural market potential. Interbrand’s Global Brand Scorecard for 2003 ranked Coca-Cola the No. 1 Brand
in the World and estimated its brand value at $70.45 billion. With an investment of more than US$1
billion in India from 1993 to 2003, Coca-Cola India announced plans to double its capacity at an
investment of $125 million between September 2002 and March 2003 which was encouraged by its
performance in 2002, thus making it one of the country’s top international investors.
CSE issued a press release in August 2003 stating: "12 major cold drink brands sold in and around Delhi
contain a deadly cocktail of pesticide residues".
The CSE used European norms for maximum permissible limits for pesticides in packaged water
“because the standards set for pesticide residues by the Bureau of Indian Standards (BIS) are vague and
undefined.” Actual Standard set by European Economic Commission (EEC) is 0.5 ppb total pesticides 0.1
ppb individual pesticides, but the tests conducted by PML(Pollution Monitoring Laboratory) of CSE
revealed that the pesticide residue level was well above the global standard level by 30-36 times. The
pesticides found were known to cause cancer, damage to the nervous and reproductive systems, birth
defects, and severe disruption of the immune system.
Coca Cola Response:
Coca-Cola & Pepsi challenged the very authenticity of the CSE report. The companies attacked the
credibility of the CSE and their lab results but promised to provide this data to the public, threatened
legal action against the CSE while seeking a gag order, and contacted the United States Embassy in India
for assistance.
In a statement published by Sanjiv Gupta, he mentioned that the allegations made by CSE were
misleading & unaccredited data is used to discredit trusted and world-class brands. He assured that their
soft drinks in India are produced to the same level of purity, regarding pesticides, as the EU criteria for
bottled water.
In order to regain trust of public, they carried out test individually & published full data to them by
means of advertisement & corporate websites.
Coke India CEO Sanjiv Gupta and his team had to decide how to rebuild public trust and had to weigh a
larger policy decision at the same time taking on a leadership role and help create higher standards for
food and beverage safety. Following are the key decision implemented:
1. Communicate openly with key constituents, including the public, media, employees, franchisees,
the trade/channel, state and national government, CSE and suppliers with a spirit of partnership
and a willingness to resolve the issue in a way that benefits the Indian consumer.
2. Attempt to collaborate with the CSE, acknowledging that your goals may be closer together than
you initially imagine. Take the time to discover their true motivation, ultimate goal, and ideal
outcome. Recognize the enormous reputational benefits that could come from such a
partnership, or even a willingness to partner.
3. Choose to differentiate as a socially responsible company. Take advantage of an opportunity to
demonstrate leadership in a sphere that is critically important to your key constituents.
4. Recognize the upside for reputational risk on a corporate level if the situation can be turned into
a positive.
5. Launched Coca-Cola eKO Management System to educate the public, the government, and the
media about environmental stewardship activities, about the framework implemented by Coca-
Cola India to transform the principle of operating in ways that Protect, Preserve and Enhance
the Environment in actions.
Take-away from the Case Study:
Sanjiv Gupta depicted following transformational leadership qualities pre-CSE attack contributing to
make Coca-Cola No.1 Brand in market :
1. Leader positional power - the degree of positional authority the leader has over staff in relation
to the specific task at hand.
2. Task structure - how prescribed and systematized is the action the leader wants the staff to
take.
3. Leader-member relations - these can be either good or poor.
The model has been shown to work best when situations are classified into one of three categories:
1. Favorable
2. Moderately favorable
3. Unfavorable
When the situation is moderately favorable,(i.e. good leader-member relations, with low task structure
and a low level of positional authority; or when leader-member relations are poor, the task structure is
high, and positional authority is high) a task-orientated approach has been shown to be more effective.
In all other situations a relationship-orientated approach works best.
Knowing that Indian public had a short attention span, it wouldn’t be long before the CSE’s report faded,
just as the Kinley water issue; Gupta took this as an opportunity to display higher standards of corporate
social responsibility.
This example highlights the importance of a strong reputation, a willingness to collaborate, and a
strategic response to successfully weathering the crisis.